Kenya’s public debt has increased by KSh233.5 billion between July and December 2018, to KSh5.273 trillion compared to KSh5.039 trillion six months earlier.
“Kenya’s public and publicly guaranteed debt was KSh 5,272.50 billion (tentatively 56.6 percent of GDP) as at end December 2018. This comprised KSh 2,548.8 billion in domestic debt and KSh 2,723.7 billion in external debt,” said the Central Bank of Kenya Weekly Bulletin dated February 8.
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Razia Khan, Chief Economist, Africa and Middle East East at Standard Chartered Bank, says Kenya’s debt sustainability position is comfortable, but perceptions of the country’s creditworthiness will determine its ability to refinance debt falling due.
“With its first Eurobond maturity in 2019 and as the initial five-year grace period extended by the Export-Import Bank of China for the Standard Gauge Railway ends in May, Kenya will face elevated debt service obligations in 2019. However, we expect the country to be able to comfortably manage its debt obligations, despite this anticipated surge in debt service payments this year,” she said.
“We expect fiscal reforms to focus on strengthening public financial management and reassuring on devolution, with clarification on counties’ ability to collect their own revenue,” said Khan.
Commercial Bank of Africa’s Weekly Fixed Income Report stated that “In less than one month, the government has narrowed its debt gap by Ksh129.82Bn raising the cumulative local borrowing for this fiscal cycle to Ksh 202.25Bn, 65.20% of its full-year target.”
With the increased demand in the shorter-term papers, “Following this success, the government will be sticking to this approach in this month’s bond auction,” CBA Notes.
The National Treasury is issuing a five (FXD1/2019/5) and ten (FXD1/2019/10) year bond for a total of Ksh 50.00Bn representing a Ksh 10.00Bn increase in quantum of monthly issues. “While this could signal increased government debt appetite, any upward pressure on yields may be limited by the persistent heavy liquidity and Treasury’s continued rejection of aggressive bids.”
Going forward, the National Treasury plans to restructure public debt to increase maturity period according to the draft policy statement for the 2019/2020 national Budget.
“Kenya’s risk to debt distress has been raised from low to moderate on account of refinancing risks on external debt. This is expected to be short term as the Government continues with its fiscal consolidation plan and implements the Government liability management strategy so as to restructure short term commercial loans by replacing them with long dated maturities. The liability management strategy also aims at limiting non-concessional loans to project with high economic and social returns to stimulate growth and exports which will improve the debt sustainability ratios.”